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Asia: Stock futures meet a speed bump as life returns to havens

Thursday, July 14, 2016 - 08:45
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[WELLINGTON] Asian index futures were mixed as havens built on their gains, a sign the exuberance that has buoyed markets this week has been tempered amid a selloff in crude oil.

Contracts on Chinese and Hong Kong-listed stocks fell with Chicago-traded Nikkei 225 Stock Average futures, while those on the Australian and Korean equity benchmarks climbed.

The S&P 500 was little changed Wednesday after oil's 4.4 per cent plunge on an unexpected uptick in US fuel supplies weighed on energy shares. Crude lingered near US$45 a barrel, while gold climbed for a second day Thursday.

The yen added another 0.4 per cent after rallying from its weakest level this month Wednesday, as Australian bonds rebounded.

Japanese stocks have led the revival in Asian equities this week, erasing losses incurred after the Brexit vote as Prime Minister Shinzo Abe promised a package of fiscal stimulus. In the absence of further details on the plans, speculation Japan could be considering so-called helicopter money percolated, a prospect refuted by Chief Cabinet Secretary Yoshihide Suga.

This comes amid expectations the Bank of England will cut interest rates Thursday, in a bid to bolster the UK economy following the decision to leave the European Union. Traders also put the chance of a benchmark rate hike from the Federal Reserve in 2016 at less than 40 per cent, despite signs US growth is accelerating.

"The market has got a bit exhausted after the run up of late," James Audiss, a senior investment adviser at Shaw and Partners in Sydney, which manages about US$7.4 billion, said by phone.

"Investors remain very skittish and it won't take much to rattle sentiment. We're watching the yen-dollar rate really closely after the calls to do helicopter money in Japan got dialed back."

The data slate is relatively full in Asia today, with Singapore to update on gross domestic product and Australia to report on jobs and inflation expectations. South Korea is projected to keep its key rates on hold, and Indonesia issues data on foreign reserves. The BOE will reduce its official rate by 25 basis points, or 0.25 per centage point, to 0.25 per cent, according to the median of 54 economists' estimates collated by Bloomberg.

Japan's currency strengthened to 104.07 per dollar as of 8:56 am in Tokyo, extending last session's 0.2 per cent turnaround which came after the yen's worst two-day selloff since 2014.

A key economic adviser to Abe said Wednesday that boosting fiscal and monetary stimulus at the same time would be a good strategy, though helicopter money - an unorthodox approach which could see the Bank of Japan directly fund government spending - would be a "very risky gamble," Koichi Hamada said in an interview.

The pound dropped 0.2 per cent to US$1.3122 after sinking 0.8 per cent on Wednesday amid Theresa May's elevation as Britain's new prime minister. The Australian and New Zealand dollars were also down 0.2 per cent.

New Zealand's S&P/NZX 50 Index, the first major stock index to start trading each day, added 0.2 per cent, rising for the 12th time in 14 days. Futures on the S&P 500, meanwhile, dropped 0.1 per cent after the US benchmark eked out another record close despite climbing less than 0.1 per cent on Wednesday.

In Australia, futures on the S&P/ASX 200 Index advanced 0.2 per cent with those on the Kospi index in Seoul, while contracts on Hong Kong's Hang Seng and Hang Seng China Enterprises indexes slipped at least 0.1 per cent in most recent trading. FTSE China A50 Index futures were down 0.4 per cent.

Yen-denominated Nikkei 225 futures on the Chicago Mercantile Exchange fell 0.6 per cent early Thursday, dropping to 16,250 after a 1 per cent loss in the previous session. In the Osaka pre-market, however, futures on the Japanese equity measure were up 0.6 per cent to 16,320 amid a 0.3 per cent increase in Singapore-traded Nikkei 225 contracts.

BLOOMBERG